Changes to estate tax and new gift tax eminent

Published June 25, 2013 at 9:06 am

Jeremy Miller

State Seantor District 28

On May 20, just minutes before the midnight deadline, the legislature passed the Omnibus Tax Bill, which adds over $2 billion in new taxes and increases government spending in the next biennium by over $3 billion. Along with these increases, the tax bill included significant changes to Minnesota’s estate tax and creates a new Minnesota gift tax. Both aspects of this bill have garnered little attention; however, they will impact many Minnesota taxpayers, including family businesses and farms. I did not support the tax bill, but it’s important for constituents to be aware of these changes to the tax code.

Effective July 1, 2013, Minnesota will become the second state, Connecticut being the first, to enact a gift tax. A gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value in return. The new law will impose a 10 percent tax on taxable gifts in excess of a lifetime total of $1 million made by Minnesota residents and non-residents owning property located in Minnesota. Any applicable gifts made in excess of $1 million over an individual’s lifetime will be subject to the new 10 percent gift tax.

Minnesota residents and non-residents will be subject to Minnesota gift tax on all transfers of real property located within Minnesota and transfers of tangible personal property that is located in Minnesota. In addition, gifts of interest, such as business interests, that pass through entities such as LLC’s or S Corporations will be subject to Minnesota gift tax if the entity holds property in Minnesota.

Following federal tax law, an annual exclusion from the Minnesota gift tax applies to gifts that do not exceed $14,000 per recipient. Also excluded from the Minnesota gift tax are gifts to charities and spouses.

The Omnibus Tax Bill also made changes to the current Minnesota estate tax. The estate tax is a tax on your right to transfer property at your death. The new law imposes the Minnesota estate tax on non-residents that own real estate and/or tangible property located in Minnesota. The new law will also include property held in pass-through entities such as S corporations, partnerships (including a multi-member LLC taxed as a partnership), a single-member LLC or similar entity, or a trust in a nonresident’s estate. The expansion of the estate tax will retroactively affect estates of decedents who died on or after Jan. 1, 2013.

These changes, along with many other changes made to our tax code this year, can be complicated and difficult to understand. For further advice on Minnesota’s gift or estate tax, you may wish to contact a financial or estate advisor.

In other news, over the past few weeks, I have been approached by several people who have asked me to run for Minnesota’s First Congressional District seat in 2014. I’m honored to be thought of as a potential candidate for this position. When someone asks you to run for United States Congress, I believe it deserves a strong look. After thoughtful consideration, Janel and I have decided that with our young and growing family (16-month-old son and expecting twin boys in August), my responsibilities in our family’s fourth generation recycling business and my role as District 28 State Senator, the timing just isn’t right to run for Congress.

I’m focused on being the best husband and father I can be along with running a successful small business and continuing to serve the people of Fillmore, Houston and Winona counties as a member of the Minnesota Senate.

As always, if I can ever be of any assistance, please contact my office by phone 651-296-5649 or email [email protected] It is an honor to serve as your State Senator.